Ever Glory United Launches S\$17 Million Share Placement: What Retail Investors Must Know

Key Highlights of the Share Placement Announcement

• Ever Glory United Holdings Limited is planning a private placement of up to 31 million new ordinary shares at S\$0.55 per share, amounting to a maximum of S\$17.05 million raised.
• The placement will be managed by CGS International Securities Singapore Pte. Ltd. and is not underwritten.
• The offering is targeted at institutional and accredited investors under Singapore’s Securities and Futures Act, meaning no public prospectus will be issued.
• The new shares will represent 8.92% of the current share capital and 8.19% of the enlarged share capital if fully subscribed.
• Shares will be issued free of encumbrances and rank pari passu with existing shares, carrying identical rights.
• No placement will be made to directors or substantial shareholders unless specifically approved by the Singapore Exchange (SGX-ST) or shareholders.
• The placement price carries a 7.72% discount to the average trading price on the market day prior to the agreement.
• The placement agent will receive a 3.5% commission on the placement proceeds.
• Net proceeds after fees are estimated at S\$16.39 million, of which 50% will go to working capital and 50% to fund the acquisition of Guthrie Engineering (S) Pte. Ltd.
• Financial effects: Net Tangible Assets (NTA) per share will rise from 7.01 cents to 12.12 cents, but earnings per share (EPS) will decrease from 3.48 cents to 2.73 cents due to share dilution.
• The issue is made under the company’s existing general mandate, with no need for further shareholder approval unless SGX-ST requires it for specific cases.
• No directors or substantial shareholders (other than by their shareholdings) have interests in the placement; major shareholders Sun Renwang and Xu Ruibing each hold a 37.74% stake.
• The placement is subject to regulatory and listing approvals, and may not go ahead if conditions are not met.
• The company will provide periodic updates on the use of proceeds and any deviations from stated plans.

Important Shareholder Considerations and Price-Sensitive Issues

• Dilution: The placement will dilute existing shareholders’ holdings by up to 8.19%. This typically exerts short-term downward pressure on the share price unless the funds are deployed for value-accretive growth.
• Discounted Placement Price: The shares are offered at a noticeable discount to market price, which may affect secondary market pricing in the near term.
• Use of Funds: Half the proceeds will go toward working capital, boosting liquidity, while the other half will fund a strategic acquisition. The outcome of the Guthrie Engineering acquisition could significantly impact future earnings and growth prospects.
• Financial Impact: While NTA per share increases, EPS will drop due to the expanded share base unless the new capital is successfully invested for higher returns.
• Regulatory Risks: The placement is subject to various conditions including SGX-ST approval. If these are not met, the placement may be terminated.
• No Change in Controlling Interest: The placement is structured so no single investor or group will gain a controlling interest, reducing the risk of a sudden shift in corporate control.
• Major Shareholders: Both Sun Renwang and Xu Ruibing will maintain their substantial shareholdings, so no immediate change in leadership or strategy is expected.
• Price Sensitivity: The announcement and subsequent updates on placement progress, regulatory approvals, or use of proceeds are likely to move the share price, especially if the acquisition delivers strong results or if placement conditions are not met.

Detailed Breakdown of the Placement Terms

• The placement will increase the company’s issued shares from 260,246,749 to 291,246,749 (excluding treasury shares).
• NTA will jump from S\$18.26 million to S\$35.31 million, reflecting the cash injection.
• EPS for FY2024 will decrease from 3.48 cents to 2.73 cents due to the enlarged share base, even though net earnings are expected to be lower (S\$8.96 million to S\$8.30 million).
• Application for listing and quotation of new shares on SGX-ST is pending; no shares will be allotted until regulatory approval is received.
• The placement agent has confirmed subscribers will not use share borrowing arrangements or cause a change in control.
• If the placement does not proceed (due to regulatory or other conditions not being met), investors should expect further updates from the company.
• Retail investors are reminded to exercise caution as the deal is still subject to conditions and regulatory approval.

What Should Retail Shareholders Do?

• Monitor company updates on placement progress and use of proceeds, especially regarding the acquisition of Guthrie Engineering.
• Consider the impact of dilution and lower EPS against the potential for increased financial flexibility and growth prospects.
• Be aware of potential short-term share price volatility due to the discounted placement and enlarged share base.
• Note that no directors or substantial shareholders are buying into the placement, and control will remain unchanged.
• If unsure, consult a financial adviser before making trading decisions.

Conclusion

The proposed private placement by Ever Glory United Holdings is a significant corporate event with direct implications for share dilution, financial health, and growth strategy. Retail investors should closely watch for further announcements, regulatory outcomes, and the success of the Guthrie Engineering acquisition, as these will be key drivers of future share performance.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. The information is based on official company announcements and may be subject to change. Investors should conduct their own research and consult with financial professionals before making any investment decisions.

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